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Obama’s Infrastructure Proposal: A Good Start That Needs Work
Photo by Brave Heart.

How should the government allocate funding for transport infrastructure? Photo by Brave Heart.

The most intriguing piece of President Obama’s new plan to infuse the U.S. economy with jobs – by renewing roads, rail and air travel – is the proposed $50 billion dollar infrastructure bank.  While not a new concept, the creation of an infrastructure bank would likely benefit the country’s aging infrastructure.  However, the plan lacks detail on the types of projects the proposal would fund and how the federal government would seek long-term payoffs for the improvements.

Supporters think “such a bank would spur innovation by allowing a panel of experts to approve projects on merit, rather than having law-makers simply steer transportation money back home,” according to The New York Times.  The program would distribute loans by leveraging private capital and focus on financing projects with broader regional scope, for transportation and job creation. Obama has been consulting with governors on such a plan since 2008.

An infrastructure bank would promote long-term spending on much-needed infrastructure improvements, according to Michael Lind of Salon.com, who wrote in 2008 that local governments and municipalities generally fund infrastructure projects through tax-exempt income bonds paid back over long-term periods. These bonds allow local governments to spread the financial burden to taxpayers over a broad period of time, which is especially important if a project will benefit future taxpayers in the long-term.

Currently, the federal government does not issue these types of bonds.  And that’s not good, according to Lind, who says:

One result of the federal government’s archaic lack of special-purpose bonding capability has been underinvestment in public goods like infrastructure, which have large upfront costs but which spread their benefits slowly over time. For decades, Congress has sacrificed infrastructure spending to other short-term goals.

Thus the creation of an infrastructure bank could be a significant milestone, but its maximum impact requires that the bank fund projects that are in sync with demographic, geographic and cultural changes, in addition to being economically and environmentally sustainable.  The proposed legislation aims to “front load” spending of the transportation reauthorization bill, a six-year funding stream that finances a portion of almost all U.S. transportation projects.  However, it is unclear whether the funding would be explicitly attached to the bill or would be more of a one-time stimulus package.

Allison Bishins, manager of U.S. transport and climate project at EMBARQ (the producer of this blog) wonders why “Obama is trying to create a new stream of funding, rather than reforming – and actually passing – the much delayed and much needed transportation authorization bill,” which is due up for reauthorization in December 2010.

Ideally, the infrastructure bank should align with the proposed National Transportation Objectives Bill, which establishes national objectives, including: promoting energy efficiency and security, ensuring environmental protection and safety, improving economic competitiveness, and providing equal access to transportation. Other objectives include reducing per capita vehicle miles traveled by 16% and transportation-generated CO2 levels by 40%, as well as tripling walking, biking, and public transit use.

The actual proposal for infrastructure investments is more of an outline than a plan, and it is especially unclear on how the $50 billion would be allocated, though it appears the majority of funding would go towards improving roads.  The plan highlights the following:

Rebuild 150, 000 miles of roads

If this funding is exclusive to road repair – and road expansion and creation are not eligible – this is good news for the State of Good Repair (the American Society of Civil Engineers gave the country’s worsening infrastructure the grade of “D”) and local economies.  Many transportation experts support “fix it first” projects in order to improve existing infrastructure and invest in existing communities. Resurfaced roads reduce greenhouse gas emissions (GHG) by as much 2-4% according to one report, and “fix it first” strategies create more jobs than road building does.

This focus on maintaining existing roads, rather than building new ones, discourages sprawl and can curb the projected increase in vehicle miles traveled (VMT).  However, the plan does appear to emphasize roads, in general, rather than public transportation, which is a misstep, since the existing transportation authorization is already pretty good at funding roads.

From "Active Transportation for America" by the Rails-to-Trails Conservancy.

From "Active Transportation for America" by the Rails-to-Trails Conservancy.

Construct and maintain 4,000 miles of rail

“Rail” is a broad strategy that can include high speed rail (HSR), light rail, commuter rail, subway systems and Amtrak-style intercity rail.  While the plan calls for “rail” construction, language in the initial press release states “a sustained and effective commitment to a national high speed rail system over the next generation,” indicating that HSR is actually the preferred rail strategy. Other priorities appear to be an overhaul of Amtrak’s fleet, a focus on bus systems and the “New Starts” program (which involves any fixed road system, like a right-of-way or rail line, devoted exclusively to public transportation or high-occupancy vehicles).  It’s unclear why bus and transit systems are being classified as “rail” by the Administration.

Rehabilitate or reconstruct 150 miles of runway while putting in place a NextGen system that will reduce travel time and delays

This is definitely positive, for job creation and greenhouse gas emissions reductions, as the World Resources Institute wrote about in a report on GHG emissions reductions in the United States. The proposed NextGen program was developed by the Federal Aviation Administration as a way to track and guide air traffic in an effort to improve efficiency and predictability. Much of its focus is on satellite-based technology versus the current system of ground-based air traffic control. It will allow planes to fly closer on more direct routes and reduce gridlock in the skies.

What is especially confusing about this plan (beyond calling buses “rail”) is that the point of an infrastructure bank, as stated at the beginning of this post, is to fund projects on merit, not on project type.  However, the Obama Administration has already started carving out pots of money for certain strategies – mimicking existing federal funding for transportation, which is often criticized for the isolating funding streams into silos. This apparent contradiction, lack of clarity on funding allocations, and lack of detail on overall funding levels and sources of funding, make it difficult to draw conclusions about the plan.

On the plus side, Obama suggests that the plan would be supported by eliminating oil and gas subsidies, which would amount to about $45 billion over 10 years. However, Obama is calling for $50 billion at once, so it is unclear how the bill would be funded at the outset.  On the down side, there is already opposition, reducing the possibility that a bill could be passed in the near future – just one more step in a recent history of reviving, then dropping, the idea of an infrastructure bank.

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  • I think this is a great idea, it’s about time someone is doing something about the unemployment rate. America needs to get back to work. LiUNA (Laborers’ International Union of North America) estimates 1.5 million men and women in the construction industry are jobless. That’s unacceptable, somethings gotta be done

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